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On Our Radar

Mexico and Canada Say Nafta Talks With U.S. Should Be Trilateral

MEXICO CITY – Mexican and Canadian officials said Tuesday that negotiations to update the North American Free Trade Agreement with the U.S. should be trilateral as a matter of common sense, and that replacing it with bilateral pacts would be impractical.

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"Nafta is a trilateral agreement, and that has worked because it's a trilateral North American trading relationship," Canada's Minister for Foreign Affairs Chrystia Freeland said at an event in Mexico City. "Nafta can be modernized only with the agreement of the three parties...and I am confident that that will be how we go."

The view was echoed by Mexican Foreign Minister Luis Videgaray, who said three bilateral agreements between the three countries would be impractical and a lost opportunity.

"In the very beginning Nafta was not a trilateral deal, but after some thought, common sense made it a trilateral deal. And that was 25 years ago when the integration of value chains was not present," he said.

U.S. Commerce Secretary Wilbur Ross has said that the reworking of Nafta could be as the existing trilateral pact or a series of bilateral agreements with symmetrical provisions. U.S. President Donald Trump has kept open the possibility of abandoning Nafta if the U.S. doesn't secure a satisfactory deal.

The Trump administration notified Congress earlier this month of its intention to renegotiate the 23-year-old trade pact, and formal talks are expected to begin by mid or late August.

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U.S. Trade Representative Robert Lighthizer has said the U.S. hopes to maintain the existing structure of the agreement, although there are no guarantees, and that many parts of the negotiation will be conducted bilaterally.

Ms. Freeland acknowledged that some issues within the region are bilateral by nature, such as U.S. disputes with Canada over lumber and with Mexico over sugar.

Mexican Economy Minister Ildefonso Guajardo warned against too much optimism after the notification sent to Congress appeared to be simpler and more general than had been expected. The Trump administration still has to send Congress details of its concrete objectives before talks can begin.

"This second document is the most relevant to see clearly what goals will be set out in this process," Mr. Guajardo said at the event.

Mexico favors adding subjects to Nafta such as information technology and e-commerce, and is willing to address rules of origin to source more components in the region, "as long as we don't shoot ourselves in the foot and all end up losing," he said.

For example, of the TV screens assembled in Mexico for export, only 32% of the content comes from North America and the rest from Asia. An "illogically ambitious" attempt to raise the regional content to say 90% could make it easier for companies like LG and Samsung to export whole TV sets and pay corresponding tariffs than to relocate production, he said.

Mr. Guajardo stressed Mexico's opposition to the reintroduction of quotas or trade tariffs, and said actions to address trade imbalances should be through increased levels of trade and not through trade restrictions. Mr. Trump has said he wants to eventually eliminate U.S. deficits such as the $63 billion trade gap it had last year with Mexico.